Andalusia Government’s Decision to Lower Taxes
On the 26th of April, the coalition government of Andalusia made a significant decision to reduce taxes in the region. This decision will see a significant reduction in six key taxes.
Significant Reduction in Six Key Taxes
The taxes that will be significantly reduced include the IRPF (personal income tax), IHT (inheritance tax), Patrimonio (wealth tax), ITP (property transfer tax), AJD (stamp duty), and taxes on gambling.
Implications of the Inheritance Tax Reduction
The plan to further reduce the IHT is somewhat surprising, given that over the past three years, none of our clients have had to pay anything on inheriting an estate in Andalusia. This is due to the drastic changes in IHT that took place in April 2019. However, this is certainly welcome news.
Benefits of Lowering Taxation
As someone who has consistently advocated for lower taxation, I believe this move will greatly attract foreign investments, leading to job creation and wealth generation. Raising taxes often results in taxpayers leaving, leading to job losses and a general impoverishment of society. Interestingly, Andalusia has never made more money in taxes since it lowered them in 2019, a phenomenon known in Economic theory as the Laffer curve.
Andalusia’s Decision to Slash Property Transfer Tax
The Andalusian parliament has enacted a new law, published in Andalusia’s Official Law Gazette (BOJA), which significantly reduces the Property Transfer Tax (PTT) for 2021. This temporary measure is designed to counteract the negative impact of Covid-19 on the property market and stimulate property transactions. However, this measure will only be in effect until the end of this year.
Changes in the Property Transfer Tax
Previously, Andalusia used a sliding scale for the ITP that started at 8% and went up to 10% depending on the sale value. This has now been abolished, and a flat tax rate of 7% applies regardless of the sale value. This change will be in effect from the 28th of April 2021 until the 31st of December 2021.
